Warren Buffett Just Obliterated Bitcoin in Four Words

Warren Buffett Just Obliterated Bitcoin in Four Words

Billionaire investor Warren Buffett is taking his already harsh criticism of Bitcoin to another level.

Buffett, who has previously said that cryptocurrencies like Bitcoin will almost certainly “come to a bad ending,” was asked over the weekend at the Berkshire Hathaway annual meeting about comments made by business partner Charlie Munger—who has called Bitcoin “turds” and compared it to rat poison.

Buffett didn’t mince words. Bitcoin is “probably rat poison squared,” Buffett replied.

On Monday, Buffett appeared on CNBC to explain that he was so down on Bitcoin, and cryptocurrencies in general, because they don’t produce anything—so they’re essentially investments based on pure speculation.

“When you buy non-productive assets, all you’re counting on is that the next person is going to pay you more, because they’re even more excited about another next person coming along,” Buffett said. “The asset itself is creating nothing.”

Buffett has said in the past that he and many investors really don’t understand Bitcoin. On CNBC Monday, he added that cryptocurrencies’ mystique actually entices investors—because it seems like magic when, say, the price of Bitcoin rose 36% in April. (Mind you, that increase came after Bitcoin’s price had fallen to one-third of its all-time high near $20,000, which it hit last December.)

“It’s better if they don’t understand it,” Buffett said Monday. “If you don’t understand it you get much more excited.”

credit:  http://time.com/money/5267647/warren-buffett-bitcoin-invest/

Warren Buffett explains one thing people still don't understand about bitcoin

Warren Buffett explains one thing people still don't understand about bitcoin

When it comes to bitcoin, billionaire investor Warren Buffett wants to make one thing clear: Unlike buying stocks, bonds or real estate, buying bitcoin is not an investment.

That's because it lacks intrinsic value, Buffett says.

"If you buy something like bitcoin or some cryptocurrency, you don't have anything that is producing anything," Buffett says in an interview with Yahoo Finance. "You're just hoping the next guy pays more. And you only feel you'll find the next guy to pay more if he thinks he's going to find someone that's going to pay more.

"You aren't investing when you do that, you're speculating."

Famous for his "buy and hold" investment strategy, the Berkshire Hathaway CEO built his company — and his $82.8 billion net worth — backing companies that have substantive value.

"Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value," Buffett wrote in his 1996 letter to shareholders. "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes."

To be an investment, what you're buying has to be worth something on its own, Buffett says.

For example, "If you buy something [like] a farm, an apartment house or an interest in a business and look to the asset itself to determine whether you've done something — what the farm produces, what the business earns ... it's a perfectly satisfactory investment," Buffett explains to Yahoo Finance. "You look at the investment itself to deliver the return to you.

"If you ban trading in farms, you could still buy farms, and have a perfectly decent investment," Buffett says.

Bitcoin, however, only increases in value by being bought and sold, he argues. Its value comes from what people are willing to pay.

"[I]f you ban trading in ... bitcoin, which nobody knows exactly what it is, people would say, 'Well why in the world would I buy it?'"

"The idea that it has some huge intrinsic value is just a joke in my view," Buffett said.

In 2017, bitcoin soared from below $1,000 at the start of the year to over $19,000 in December, catching the attention of everyone from J.P. Morgan Chase CEO Jamie Dimon to NFL players. Tuesday, bitcoin traded near $8,900 according to CoinDesk's price index.

Buffett sees a bleak future for the digital currency.

"In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending," Buffett told CNBC in January."When it happens or how or anything else, I don't know."

Of course, Buffett has been wrong about backing new technologiesbefore. He missed opportunities to invest in Google and Amazon, decisions he now calls mistakes.

"I did not think [founder Jeff Bezos] could succeed on the scale he has," Buffett said to shareholders in May 2017.

Crypto-enthusiasts argue that Buffet doesn't understand blockchain-based coins, and he has admitted as much.

Still, many other investing experts like CNBC's Jim Cramer, Kevin O'Leary and Tony Robbins, also call buying cryptocurrencies a gamble. They suggest thinking of it like rolling the dice in Las Vegas.

"As long as you can afford to lose everything you put into it, go with it," O'Leary told CNBC Make It in December, 2017.

That mindset is alright with Buffett.

"There's nothing wrong with it if you want to gamble [that] somebody else will come along and pay you more money tomorrow," Buffett tells Yahoo Finance. "That's one kind of game. That is not investing."

Don't miss: Here's how much grad school cost when Warren Buffett graduated in 1951, compared to today

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credit:  https://www.cnbc.com/2018/05/01/warren-buffett-bitcoin-isnt-an-investment.html

Joel Greenblatt

Joel Greenblatt (born December 13, 1957) is an American academic, hedge fund manager, investor, and writer. He is a value investor, and adjunct professor at the Columbia University Graduate School of Business. He is the former chairman of the board of Alliant Techsystems and founder of the New York Securities Auction Corporation. He is also a director at Pzena Investment Management, a high-end value firm.

John C. Bogle: Wealth and philanthropy

Wealth and philanthropy[edit]

As of February 2017, Bogle has a net worth of $80 million USD according to Business Insider.^[14][15] During his high-earning years at Vanguard he regularly gave half his salary to charity, including Blair Academy and Princeton.^[9]

Awards and honors[edit]

• Named one of the investment industry's four "Giants of the 20th Century" by Fortune magazine in 1999.
• Awarded the Woodrow Wilson Award from Princeton University for "distinguished achievement in the Nation's service" (1999).
• Named one of the "world's 100 most powerful and influential people" by Time magazine in 2004.^[16]
• Institutional Investor's Lifetime Achievement Award (2004).

John C. Bogle: Investment philosophy[

Investment philosophy[edit]

Bogle's innovative idea was creating the world's first index mutual fund in 1975. Bogle's idea was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively managed funds.

Bogle's idea of index investing offers a clear yet prominent distinction between investment and speculations. The main difference between investment and speculation lies in the time horizon. Investment is concerned with capturing returns on the long-run with lower risk, while speculation is concerned with achieving returns over a short period of time. Bogle believes this is an important analysis to be taken into account as short-term, risky investments have been flooding the financial markets.^[10]

Bogle is known for his insistence, in numerous media appearances and in writing, on the superiority of index funds over traditional actively managed mutual funds. He contends that it is folly to attempt to pick actively managed mutual funds and expect their performance to beat a low-cost index fund over a long period of time, after accounting for the fees that actively managed funds charge.^[8]

Bogle argues for an approach to investing defined by simplicity and common sense. Below are his eight basic rules for investors:^[11]

1. Select low-cost funds
2. Consider carefully the added costs of advice
3. Do not overrate past fund performance
4. Use past performance to determine consistency and risk
5. Beware of stars (as in, star mutual fund managers)
6. Beware of asset size
7. Don't own too many funds
8. Buy your fund portfolio - and hold it

John C. Bogle

ohn Clifton "Jack" Bogle (born May 8, 1929) is an American investor, business magnate, and philanthropist. He is the founder and retired chief executive of The Vanguard Group.

His 1999 book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor became a bestseller and is considered a classic within the investment community.

Seth Klarman: Investment philosophy

Investment philosophy[edit]

Klarman is a known value investor, and has stated that he has known he was one since junior year of college at age 25. During an interview at Harvard Business School, he stated: "It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic."^[15]

When asked what drives his fund's overall investment strategy and how value investing fits into the hedge fund market he replied:

Firstly, Value investing is intellectually elegant. You’re basically buying bargains. It also appeals because all the studies demonstrate that it works. People who chase growth, who chase high fliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline. Third, it’s easy to talk in the abstract, but in real life you see situations that are just plain mispriced, where an ignored, neglected, or abhorred company may be just as attractive as others in the same industry. In time, the discount will be corrected, and you will have the wind at your back as a holder of the stock.^[15]

Klarman has been an avid supporter of the teachings of Benjamin Graham, and during the 2008 financial crisis criticized the short-term thinking of other fund managers, he believes that the "this-time-is-different" mindset will give a false sense of security to investors and they ought to look at the bigger picture. He stresses the utility in the economy's business cycles and their predestined and perpetual self-corrective tendency.^[15] Klarman is known to sit on 30% to 50% of his funds in cash as to avoid unfavorable market conditions and only buys stocks he thinks have a suitable mispricing.^[7]

He makes unusual investments, buying unpopular assets while they are undervalued, using complex derivatives, and buying put options. During his first years running Baupost he made it a point to only invest in companies that were not widely accepted by the Wall Street community; he stressed managing risk and using the margin of safety.^[7] He is a very conservative investor, and often holds a significant amount of cash in his investment portfolios, sometimes in excess of 50% of the total.^[18]Despite his unconventional strategies, he has consistently achieved high returns.^[19] Klarman looks for companies that are traded at a discount (so he can assume shares with a margin of safety). Klarman and his fund usually go "bargain hunting," when companies are distressed or face low growth or declining years. It was reported by The Boston Globe in 2015 that when energy stocks were declining, his firm "started looking for deals."^[20] According to Institutional Investor, "[Klarman] has succeeded by deftly exploiting under-valued markets whether they are in equities, junk bonds, bankruptcies, foreign bonds or real estate.

Seth Klarman: Investment philosophy

Investment philosophy[edit]

Klarman is a known value investor, and has stated that he has known he was one since junior year of college at age 25. During an interview at Harvard Business School, he stated: "It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic."^[15]

When asked what drives his fund's overall investment strategy and how value investing fits into the hedge fund market he replied:

Firstly, Value investing is intellectually elegant. You’re basically buying bargains. It also appeals because all the studies demonstrate that it works. People who chase growth, who chase high fliers, inevitably lose because they paid a premium price. They lose to the people who have more patience and more discipline. Third, it’s easy to talk in the abstract, but in real life you see situations that are just plain mispriced, where an ignored, neglected, or abhorred company may be just as attractive as others in the same industry. In time, the discount will be corrected, and you will have the wind at your back as a holder of the stock.^[15]

Klarman has been an avid supporter of the teachings of Benjamin Graham, and during the 2008 financial crisis criticized the short-term thinking of other fund managers, he believes that the "this-time-is-different" mindset will give a false sense of security to investors and they ought to look at the bigger picture. He stresses the utility in the economy's business cycles and their predestined and perpetual self-corrective tendency.^[15] Klarman is known to sit on 30% to 50% of his funds in cash as to avoid unfavorable market conditions and only buys stocks he thinks have a suitable mispricing.^[7]

He makes unusual investments, buying unpopular assets while they are undervalued, using complex derivatives, and buying put options. During his first years running Baupost he made it a point to only invest in companies that were not widely accepted by the Wall Street community; he stressed managing risk and using the margin of safety.^[7] He is a very conservative investor, and often holds a significant amount of cash in his investment portfolios, sometimes in excess of 50% of the total.^[18]Despite his unconventional strategies, he has consistently achieved high returns.^[19] Klarman looks for companies that are traded at a discount (so he can assume shares with a margin of safety). Klarman and his fund usually go "bargain hunting," when companies are distressed or face low growth or declining years. It was reported by The Boston Globe in 2015 that when energy stocks were declining, his firm "started looking for deals."^[20] According to Institutional Investor, "[Klarman] has succeeded by deftly exploiting under-valued markets whether they are in equities, junk bonds, bankruptcies, foreign bonds or real estate."

Seth Klarman: Early life and education

Early life and education[edit]

Seth Andrew Klarman was born on May 21, 1957 in New York City.^[6][2] When he was six he moved to the Mt. Washington area of Baltimore, Maryland near the Pimlico Race Track,^[7] and grew up in a traditional Jewish family.^[8][9][10] His father was a public health economist at Johns Hopkins University and his mother taught high school English.^[11][12] His parents divorced shortly after their moving to Baltimore.^[7]

When he was four years old he redecorated his room to match a retail store putting price tags on all of his belongings and gave an oral presentation to his fifth grade class about the logistics of buying a stock. As he grew older had a variety of small time business ventures including a paper route, a snow cone stand, a snow shoveling business, and sold stamp-coin collections on the weekends.^[6] When he was 10 years old he purchased his first stock, one share of Johnson & Johnson (the stock splitthree-for-one and over time tripled his initial investment). At age 12 he was regularly calling his broker to get stock quotes, his reasoning behind buying a share of Johnson & Johnson was the fact that he has used a lot of band-aids (a product of the company) during his earlier years.^[6]

Klarman attended Cornell University in Ithaca, New York, and was interested in majoring in mathematics but instead chose to pursue economics.^[7] He graduated magna cum laude in economics with a minor in history in 1979.^[13] In the summer of his junior year he interned at the Mutual Shares fund and was introduced to Max Heine and Michael Price. After graduating from college he went back to the company to work for 18 months before deciding to go to business school.^[7] He went on to attend Harvard Business School where he was a Baker Scholar and was classmates with Jeffrey Immelt, Steve Burke, Stephen Mandel, James Long and Jamie Dimon.

Seth Klarman

Seth Andrew Klarman (born May 21, 1957)^[2][3] is an American investor and hedge fund manager. He is known as a value investor and is currently the chief executive and portfolio manager of the Baupost Group, a Boston-based private investment partnership he founded in 1982.

He closely follows the investment philosophy of Benjamin Graham and is known for buying unpopular assets while they are undervalued, seeking a margin of safety and profiting off of their rise in price. Since his fund's $27 million-dollar inception to 2008 he has realized a 20 percent compound return-on-investment and as of 2016 manages $31 billion in assets.

In February 2018, Forbes Magazine listed his personal fortune at US$1.50 billion. In 2015, Klarman was listed as the 15th highest earning hedge fund manager in the world.^[1] In 2008, he was inducted into Institutional Investors Alpha's Hedge Fund Manager Hall of Fame.^[4] He has drawn numerous comparisons to fellow value investor Warren Buffett, and akin to Buffett's notation as the "Oracle of Omaha," he is known as the "Oracle of Boston."^[5

Charlie Munger: Wealth and philanthropy

Wealth and philanthropy[edit]

As of February 2018, Munger has an estimated net worth of $1.74 billion according to Forbes Magazine.^[25]

Munger is a major benefactor of the University of Michigan. In 2007, Munger made a $3 million gift to the University of Michigan Law School for lighting improvements in Hutchins Hall and the William W. Cook Legal Research Building, including the noted Reading Room. In 2011, Munger made another gift to the Law School, contributing $20 million for renovations to the Lawyers Club housing complex, which will cover the majority of the $39 million cost. The renovated portion of the Lawyers Club will be renamed the Charles T. Munger Residences in the Lawyers Club in his honor.^{[26][27][28][29]}

On December 28, 2011, Munger donated 10 shares of Berkshire Hathaway Class A stock (currently valued at $288,200 per share, or $2.88 million total) to the University of Michigan.^[30]

On April 18, 2013, the University of Michigan announced the single largest gift in its history: a US$110 million gift from Munger to fund a new "state of the art" residence designed to foster a community of scholars, where graduate students from multiple disciplines can live and exchange ideas.^[31] The gift includes US$10 million for graduate student fellowships.^[32]

In addition to the University of Michigan, Munger and his late wife Nancy B. Munger have been major benefactors of Stanford University. Nancy Munger was an alumna of Stanford, and Wendy Munger, Charlie Munger's daughter from a previous marriage, was also an alumna (A.B. 1972). Both Nancy and Wendy Munger served as members of the Stanford board of trustees. In 2004, the Mungers donated 500 shares of Berkshire Hathaway Class A stock, then valued at $43.5 million, to Stanford to build a graduate student housing complex.^[33][34]

The Munger Graduate Residence opened in late 2009 and now houses 600 law and graduate students.^[35] The Mungers gave a major gift to Stanford's Green Libraryto fund the restoration of the Bing Wing as well as the construction of a rotunda on the library's second floor, and endowed the Munger Chair in Nancy and Charles Munger Professorship of Business at Stanford Law School.^[3][36]

In 1997, the Mungers donated $1.8 million to the Marlborough School in Los Angeles, of which Nancy Munger was an alumna.^[3] The couple also donated to the Polytechnic School in Pasadena and the Los Angeles YMCA.^[37]

Munger has been a trustee of the Harvard-Westlake School in Los Angeles for more than 40 years, and previously served as chair of the board of trustees. His five sons and stepsons as well as at least one grandson graduated from the prep school. In 2009, Munger donated eight shares of Berkshire Hathaway Class A stock, worth nearly $800,000, to Harvard-Westlake.^[3][38] In 2006, Munger donated 100 shares of Berkshire Hathaway Class A stock, then valued at $9.2 million, to the school toward a building campaign at Harvard-Westlake's middle school campus. The Mungers had previously made a gift to build the $13 million Munger Science Center at the high school campus, a two-story classroom and laboratory building which opened in 1995 and has been described as "a science teacher's dream".^[39][40] The design of the Science Center was substantially influenced by Munger.^[3]

In October 2014, Munger announced that he would donate $65 million to the Kavli Institute for Theoretical Physics at the University of California, Santa Barbara. This is the largest gift in the history of the school. The donation will go toward the construction of a residence building for visitors of the Kavli Institute in an effort to bring together physicists to exchange ideas as Munger stated,"to talk to one another, create new stuff, cross-fertilize ideas".^[41]

In March 2016, Munger announced a further $200 million gift to UC Santa Barbara for state of the art student housing, tripling the record gift he gave for the Kavli Institute for Theoretical Physics.^[42][43]

Munger has not signed The Giving Pledge that was started by his partner Warren Buffett and Co-Director, Bill Gates.

Charlie Munger: Personal life

Personal life[edit]

From his first marriage to Nancy Huggins,^[3] Munger had three children, Wendy (a former corporate lawyer and trustee of Stanford University^[20]), Molly (a civil rights attorney and funder of a ballot initiative to raise California taxes for public education.^[21]) and Teddy (deceased, leukemia, age 9).

From his marriage to Nancy Barry, Munger is a father of four children—physicist and Republican activist Charles T. Munger Jr., Emilie Munger Ogden, Barry A. Munger and Philip R. Munger—and two stepchildren: William Harold Borthwick and David Borthwick.^[22] Nancy Barry Munger died in 2010.^[23]

Munger enjoys architecture and has designed multiple buildings, including dormitories at Stanford University and University of Michigan as well as the house he currently inhabits.^[24]

Charlie Munger: Investment philosophy

Investment philosophy[edit]

"Elementary, worldly wisdom"[edit]

In multiple speeches, and in the book Poor Charlie's Almanack, Munger has introduced the concept of "elementary, worldly wisdom" as it relates to business and finance. Munger's worldly wisdom consists of a set of mental models framed as a latticework to help solve critical business problems.^[3]

Munger, along with Buffett, is one of the main inspirations behind the book Seeking Wisdom: From Darwin to Munger. Author Peter Bevelin explained his key learnings from both Munger and Buffett in a 2007 interview: "How to think about businesses and investing, how to behave in life, the importance of ethics and honesty, how to approach problems but foremost how to reduce the chance of meeting problems." Bevelin stated that previously, he "was lacking the Munger ability to un-learn my own best-loved ideas".^[10]

Munger states that high ethical standards are integral to his philosophy; at the 2009 Wesco Financial Corporation annual meeting he said, "Good businesses are ethical businesses. A business model that relies on trickery is doomed to fail."^[11] During an interview and Q&A session at Harvard-Westlake School on January 19, 2010, Munger referred to American philosopher Charles Frankel in his discussion on the financial crisis of 2007–08 and the philosophy of responsibility. Munger explained that Frankel believed:

...the system is responsible in proportion to the degree that the people who make the decisions bear the consequences. So to Charlie Frankel, you don’t create a loan system where all the people who make the loans promptly dump them on somebody else through lies and twaddle, and they don’t bear the responsibility when the loans are good or bad. To Frankel, that is amoral, that is an irresponsible system.^[12]

Munger is critical of cryptocurrencies, referring to Bitcoin as "poison".^[13] In early 2018 he likened bitcoin to "harvested baby brains" in an interview with Yahoo Finance.^[14]

Lollapalooza effect[edit]

Munger uses the term "Lollapalooza effect" for multiple biases, tendencies or mental models acting at the same time in the same direction. With the Lollapalooza effect, itself a mental model, the result is often extreme, due to the confluence of the mental models, biases or tendencies acting together, greatly increasing the likelihood of acting irrationally.^[15]

During a talk at Harvard in 1995 entitled The Psychology of Human Misjudgment, Munger mentions Tupperware parties and open outcry auctions, where he explained "three, four, five of these things work together and it turns human brains into mush,"^[16][17] meaning that normal people will be highly likely to succumb to the multiple irrational tendencies acting in the same direction. In the Tupperware party, you have reciprocation, consistency and commitment tendency, and social proof. (The hostess gave the party and the tendency is to reciprocate; you say you like certain products during the party so purchasing would be consistent with views you've committed to; other people are buying, which is the social proof.) In the open outcry auction, there is social proof of others bidding, reciprocation tendency, commitment to buying the item, and deprivation super-reaction syndrome, i.e. sense of loss. The latter is an individual's sense of loss of what he believe should be or is his. These biases often occur at either conscious or subconscious level, and in both microeconomic and macroeconomic scale.